Exit announcement - Pure Gym tenanted property

News: Investment News | 17 October 2017

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Private investors double their money on sale of central London Pure Gym property.

  • IRR of 18% outperforms expectations
  • Increasing appeal of South Bank’s ‘Nine Elms’ regeneration area key in driving up value

Clients of Connection Capital, the specialist private client investment business, have doubled their money in four years on the recent sale of a central London commercial property which is let to budget gym operator Pure Gym.

The property in the ‘Nine Elms’ area of London’s South Bank, one of the capital’s most important regeneration projects of recent years, was purchased for £2.55 million in 2013. It has just been sold for £4.35 million  AEW UK Long Lease REIT Plc.

This has generated an 18% internal rate of return (IRR) for Connections Capital’s private investor clients – or 2x their original investment, significantly exceeding original returns forecasts.

The investment opportunity was sourced and managed by Connection Capital’s property partner, Riverside Capital, and Connection Capital clients were able to invest in multiples of £25,000.

The 19,800 square foot property on Wandsworth Road, Vauxhall, was newly built on the former site of Southbank University. It occupies the ground floor and basement of a residential and commercial development, and is ideally situated next to a Tesco Metro supermarket.

It was let to Pure Gym, one of the UK’s leading no-frills gym operators, giving it a strong and improving tenant covenant, on a 20-year lease with five yearly, RPI-linked rent reviews. The investment provided annual net income distributions of 5%.

At the time of purchase, the area was being transformed by large-scale redevelopment. Major local projects include the new US Embassy, New Covent Garden Market and Battersea Power Station.

Claire Madden, Partner at Connection Capital says, “Our private investors jumped at the chance to buy into this up-and-coming location in the heart of London’s South Bank regeneration area, and their investment has really paid off.”

“Today, the improvements that have taken place in the area, its situation on a busy street next to businesses and homes, and the strength of the tenant covenant made this a highly attractive prospects for potential purchasers. This has meant returns have significantly outperformed the original business plan.”

Dominic Wright at Riverside Capital comments, “We are delighted to have delivered such impressive returns to Connection Capital clients, ahead of schedule and well beyond forecast. We knew this location had real potential to add value and this has been confirmed by the strength of buyer appetite we have seen.”